Voters on ObamaCare: Informed and Opposed


The Obama administration has tried to convince Americans that they will like the new health law once they understand its effects. According to a new poll, they understand the law pretty well—and they don’t like what they see.

At the end of last month, we asked a sample of 1,000 adults about health reform. The big picture: A majority (55%) believe the new law will cause them to get lower-quality care, pay more in insurance premiums or taxes, or both. Consistent with other surveys, 42% favor repeal, 36% don’t, and 22% aren’t sure.

Our poll also asked about specific provisions. The mandate that individuals buy insurance or face a tax penalty generated the greatest opposition, with 55% opposed and only 25% in favor. Other aspects of the law received more mixed reviews. The provision requiring employers to offer their employees health insurance or pay a tax penalty had plurality support, with 47% in favor and 36% opposed.

On the surface, these findings might seem to support the administration’s view. People are less negative about some of the specifics than they are about the package as a whole. But does this imply that those who understand the law like it better?

To investigate, we asked people about their perceptions of the link between reform, insurance premiums, and wages—in particular, “if employer insurance costs increase as a result of the health reform plan, do you think the take-home pay of employees will decrease or not?” Policy analysts on the left and the right agree that workers bear the costs of insurance through wage offsets; numerous empirical studies have found this to be true. We therefore used people’s answer to this question as a proxy for their understanding of the effects of health reform.

Fully 49% answered the question correctly, saying that employee pay would decrease by approximately any additional amount that employers have to spend. Thirty-one percent believe employee pay would decrease but by less than the full amount; 19% believe the extra costs would have no effect on pay.

People who understand the economic consequences of health reform span the political spectrum. Although these respondents were somewhat more likely to identify themselves as Republicans than the overall population (37% versus 28%), fully 25% identified themselves as Democrats (versus 34% in the population), and 29% as independents (versus 28% in the population).

Despite their political views, the well-informed share a strong opposition to the new law. They advocate repeal 56/25; oppose the individual mandate 73/13; and oppose the employer mandate 52/36. Such numbers do not bode well for the administration’s claims that to know reform is to like it.

We also asked about three other provisions in the law: the ban on charging more for insurance based on a person’s health (“community rating”), the mandate that employers cover “children” up to age 26, and the ban on lifetime limits on benefits. We told people that these provisions would increase insurance costs by $700, $200, and $100 per year, respectively—approximately what health economists and actuaries have estimated as the added cost to an average employer-sponsored family insurance policy.

People who thought they could enjoy these benefits while someone else picked up the tab generally supported them. Those who believed that there is no “free lunch” opposed community rating (by 43% to 32%) and mandated coverage of children to age 26 (by 48% to 32%). However, they supported the new law’s ban on lifetime limits on benefits by 43% to 33%. These responses are consistent with a poll we conducted in January 2009, published in Health Affairs, which found widespread political support for a more moderate package of reforms.

As the midterm elections approach, one can expect candidates opposed to the new health reform law to point out how its effects on health costs will translate into people’s paychecks. Our poll suggests this message will resonate with voters of all stripes.

Mr. Brady is professor of political science at Stanford University and deputy director of the Hoover Institution. Mr. Kessler is professor of business and law at Stanford and a senior fellow at the Hoover Institution. Mr. Rivers is professor of political science at Stanford, senior fellow at the Hoover Institution, and president of YouGov Polimetrix.


Judge disses Dems’ ‘Alice in Wonderland’ health defense


A federal judge in Florida on Thursday said he will allow some of the lawsuit challenging the constitutionality of the health care law to proceed — and criticized Democrats for making an “Alice in Wonderland” argument to defend the law.

U.S. District Judge Roger Vinson allowed two major counts to proceed: the states’ challenge to the controversial requirement that nearly all Americans buy insurance and a required expansion of the Medicaid program.

In his ruling, Vinson criticized Democrats for seeking to have it both ways when it comes to defending the mandate to buy insurance. During the legislative debate, Republicans chastised the proposal as a new tax on the middle class. Obama defended the payment as a penalty and not a tax, but the Justice Department has argued that legally, it’s a tax.

“Congress should not be permitted to secure and cast politically difficult votes on controversial legislation by deliberately calling something one thing, after which the defenders of that legislation take an “Alice-in-Wonderland” tack and argue in court that Congress really meant something else entirely, thereby circumventing the safeguard that exists to keep their broad power in check,” he wrote.

Vinson ruled that it’s a penalty, not a tax, and must be defended under the Commerce Clause and not Congress’s taxing authority.

A Dec. 16 trial date is planned in the lawsuit, brought by 20 state attorneys general and governors. Many legal experts expect it to end up before the U.S. Supreme Court.

Just last week, a Michigan judge struck down a similar challenge to the reform law, arguing that Congress was well within its constitutional authority when it crafted the law. There are several lawsuits against the health law that are working their way through the court system, but the attorney general suit is the highest-profile challenge.

Vinson dismissed three of the states’ challenges, including complaints that the law interferes with state sovereignty as to whether employers must offer insurance; that the law coerces states into setting up insurance exchanges; that the individual mandate violates the states’ due process rights.

The states argued in September that the law violates the Constitution by requiring an expansion of the Medicaid program that’s funded in part by the states and for penalizing people for not purchasing health insurance.

Florida Attorney General Bill McCollum, a Republican who lost the state’s gubernatorial primary this summer, filed the suit minutes after President Barack Obama signed the health care bill into law in March

The Obama administration argued that the states and the National Federation of Independent Business, the small business lobby that joined the suit, don’t have standing to bring the lawsuit. They said that only individual taxpayers do.

The White House downplayed the ruling Thursday.

“Having failed in the legislative arena, opponents of reform are now turning to the courts in an attempt to overturn the work of the democratically elected branches of government,” Stephanie Cutter, an assistant to the president for special projects, wrote on the White House blog. “This is nothing new. We saw this with the Social Security Act, the Civil Rights Act, and the Voting Rights Act – constitutional challenges were brought to all three of these monumental pieces of legislation, and all of those challenges failed. So too will the challenge to health reform.”

But opponents of the law hailed it as a victory.

“It is the first step to having the individual mandate declared unconstitutional and upholding state sovereignty in our federal system and means this case will go forward to the summary judgment hearing that the court has set for December 16th,” McCollum said in a statement.

Vinson avoided politics for most of the 65-page order but noted the extraordinary partisanship surrounding the issue.

“As noted at the outset of this order, there is a widely recognized need to improve our healthcare system,” Vinson wrote. “How to accomplish that is quite controversial. For many people, including many members of Congress, it is one of the most pressing national problems of the day and justifies extraordinary measures to deal with it.

“I am only saying that (with respect to two of the particular causes of action discussed above) the plaintiffs have at least stated a plausible claim that the line has been crossed,” he added.


Youth Discontent with New Health Reform Law

Christopher Conover, PhD

Support for the Democrats among voters under 30 has plummeted since 2008. Why? The new health reform law packs ample reasons for youth to be very concerned (or even outraged). The law makes health insurance coverage for twenty-somethings more expensive, likely will contribute to their already abysmal unemployment rate, and will force millions to buy insurance they do not want at a price that is a bad deal for them.

The bill makes coverage more expensive for young adults in two ways. First, it restricts how insurance companies can price insurance. Compared to 20-24 year-olds, average health spending for males age 55-59 is more than six times as high, while for males age 60-64 this spending ratio is nearly 9 to 1. But under reform, premiums cannot vary by more than a factor of three across age groups. Young people will pay higher premiums so their parents can pay lower premiums. Since the average income of households headed by 55-64 year olds is 2.5 times as high as that of households headed by those under 25, this rule may strike many young adults as less than fair.  Young adults will be permitted to sign up for a catastrophic plan not available to others, but the adverse impact remains: those under 30 either will have to pay more for the same coverage or pay the same for less coverage.

Obamacare also increases premiums by requiring health insurers to offer preventive benefits with no patient cost-sharing (i.e., deductibles or copayments). There is nothing to stop insurers from offering free preventive benefits now; indeed, many do. However, tens of millions of Americans have coverage with cost-sharing for preventive care; for them, the elimination of cost-sharing apparently is not worth the higher premiums required. This is especially true for young adults since many preventive services (e.g., mammography, cholesterol screening, colorectal cancer screening, osteoporosis screening) are only recommended for adults 35 and older. Young adults again must cross-subside older adults who generally have much higher incomes.

Workers under 25 years of age are far more likely than older workers to be unemployed. For workers age 20-24, the August unemployment rate was 14.7 percent. But it was even higher for 20-24 year-old black males (29.7 percent) and 16-19 year-old black males (49.3 percent). Unfortunately, the new health law amounts to a tax on low-skill workers (e.g., teenagers) and those in low-pay entry-level positions (typically young workers).

The best job opportunities for low-skill workers are in leisure/hospitality services and retail trade. Under the new law, employers with more than 50 workers will be required to either offer health coverage or pay a penalty of $2,000 per full-time equivalent worker. (For part-time workers, total hours worked are summed and divided by 30 to obtain FTE workers). This penalty equals 15 percent of average wages in the food and beverage industry, and 9 percent of wages in retail trade. Worse, even employers who offer coverage still face a penalty of $3,000 for every worker who opts out of employer coverage to obtain subsidized coverage in the new health insurance Exchange. The Exchange will offer minimum-wage workers coverage for no more than 3 percent of their annual income (equaling $36 per month). This is well below the amount most employees contribute toward their employer-provided health plan, so many low-wage workers will want to jump to the Exchange.

For jobs paying only minimum wage, employers will be unable to recover the cost of these penalties by reducing wages. This will provide them a strong incentive to eliminate low-wage jobs by automating services or shifting more tasks to the customer (e.g., scanning one’s own retail purchases). Unemployment among teens and young workers will rise even further.

Finally, everyone must buy coverage (which the foregoing shows will not be a good deal for the young), or pay a tax penalty of $695 per year up to a maximum of three times that amount ($2,085) per family or 2.5 percent of household income, whichever is larger. Thus, minimum-wage youth workers either must buy overpriced coverage or pay a penalty equaling 4.8 percent of wages.

It’s little wonder that voters under 30 who gave President Obama more than two-thirds of their votes in 2008 have grown disillusioned.

Conover is a research scholar at the Center for Health Policy at Duke University.


Obama grapples with implementing unpopular health law before Nov.

By Bob Cusack and Julian Pecquet

The Obama administration is grappling with implementing the unpopular healthcare reform law in the weeks leading up to the midterm election.

Some regulations establishing the rules of the various pieces of the health overhaul passed by Congress have been issued, and others will be released in the years to come. But the threat of employers dropping their coverage because of the new law has emerged as a thorny political problem this fall.

The timing could not be worse for the administration as undecided voters are making up their minds on which congressional candidates to support on Nov. 2.

Republicans are hammering Democrats on what they call “ObamaCare” while congressional Democrats, by and large, avoid the topic. A new poll by The Hill of 12 battleground districts in the House found that nearly one in four Democrats support a repeal of the health law.

In a June 22 speech touting healthcare reform, President Obama said, “So, starting in September, some of the worst abuses will be banned forever.” He listed several aspects of the law, including an elimination of “restrictive annual limits on coverage.”

At the time, Obama said, “Those days are over.”

But for nearly a million people, those days are not over yet.

Desperate not to violate the president’s pledge that people who like their coverage will be able to keep it, the administration recently granted 30 waivers from annual limit restrictions. Those waivers were quietly posted on the Department of Health and Human Services (HHS) website — without drawing attention to the fact that they’re exempting from the law’s patient protections plans that offer some of the weakest coverage.

An administration official said all but one of the requested waivers was granted, but the source was unclear which company was denied. It is also unclear how many waiver requests are pending at HHS.

The waivers are only valid for one year, raising the possibility that more employers will seek them in the future as the limits increase every year.

The healthcare reform law sets the annual-limit floor for health plans at $750,000 for plan years beginning on or after Sept. 23, 2010. The annual minimum rises to $1.25 million for plan years starting Sept. 23, 2011, and again to $2 million for plan years starting between Sept. 23, 2012, and Jan. 1, 2014. Starting in 2014, annual limits will be banned, with some exceptions.

Lobbyists say their clients are very interested in securing waivers and are not surprised that the administration didn’t issue press releases on them.

A lobbyist who requested anonymity said, “If I were them I’d hide these exemptions too. They have to be worried about other companies seeing this and following suit. If you hit a critical mass of exemptions, it seems to me that a major assumption of the reform package — that the government can simply set an expensive mandate and expect it to be followed — falls apart.”

Administration officials dispute the notion they buried the announcements, pointing to a notice in the Federal Register and a list of the approved waivers on the HHS website.

During his Thursday briefing at the White House, press secretary Robert Gibbs was asked six different questions on the HHS waivers. The tenor: Now that the administration has started granting waivers, where will it stop — and doesn’t doing so undermine healthcare reform?

“I’m not worried that the dam is going to burst,” Gibbs answered, referring to a potential deluge of waiver requests.

The debate on this issue heated up last week after The Wall Street Journal reported that McDonald’s was threatening to drop coverage for 30,000 employees if the company didn’t get a waiver from the law’s medical loss ratio requirement for its so-called “mini-med plans.”

The administration pushed back hard against the story, claiming it was too early to speculate on who was going to get waivers for the medical loss ratio since the regulations putting it in place don’t even exist yet.

HHS Secretary Kathleen Sebelius also told reporters that the administration was being flexible with employers to help them keep their coverage. She then revealed that McDonald’s had been granted a waiver from the annual limits provision of the law within 48 hours of asking for it. Other companies that received waivers included CIGNA, Denny’s and Aetna.

The HHS waivers may have assuaged employers, but they prompted infuriated healthcare reform advocates to strongly criticize the administration.

The single-payer advocates at Physicians for a National Health Program argued that this is one more example of why Medicare for all would have been a much better solution than Democrats’ attempt to more thoroughly regulate the private health insurance market.

“Is HHS really that sympathetic to employers while being so uncaring about the needs of their employees?” senior policy fellow Don McCanne said in a statement. “I mean waivers … not just waivers … but expedited waivers! Just what was reform supposed to have accomplished?”

New York Times columnist David Leonhardt weighed in on Wednesday, noting that McDonald’s main health plan offers $2,000 worth of benefits a year — a far cry from the $750,000 minimum called for in the reform law. Getting rid of such plans, he suggested, should be embraced rather than avoided.

The healthcare reform law “does represent progress,” Leonhardt wrote. “The fact that it is beginning to disrupt the status quo — that some insurance policies will eventually be eliminated and some inefficient insurers will have to leave the market altogether — is all the proof we need.”

HHS spokeswoman Jessica Santillo said, “HHS is to committed strengthening employer-based coverage for employees and retirees, while building a bridge to a new competitive marketplace in 2014. Applications for waivers from annual limit requirements are reviewed on a case-by-case basis by Department officials who look at a series of factors including whether or not a premium increase significantly exceeds medical inflation or if a significant number of enrollees would lose access to their current plan because the coverage would not be offered in the absence of a waiver.”


The Doctor Deficit

ObamaCare: One of the marks of national health care is the waiting-list problem that plagues Britain and Canada. Delays in treatment have caused suffering and, in some cases, death. Soon, we’ll be waiting for doctors too.

Last week, the Association of American Medical Colleges reported that the looming doctor shortage will be worse than previous reports claim because of ObamaCare.

Rather than “a baseline shortage of 39,600 doctors in 2015, current estimates bring that number closer to 63,000, with a worsening of shortages through 2025,” says the medical college group’s Center for Workforce Studies.

Unless the country acts now, says the Center for Workforce Studies, we will be more than 91,000 doctors short in just 10 years. The number includes a shortage of 45,000 primary care physicians and 46,000 surgeons and medical specialists.

This study confirms what others have said.

Two years ago, the physician search firm of Merritt, Hawkins & Associates estimated that by 2020 the U.S. will need 90,000 to 200,000 more doctors than we will have. At that point, the wait to see a doctor for a routine visit would be three to four months.

A year after the Merritt Hawkins report, Joseph Stubbs, president of the American College of Physicians, the country’s second-largest doctor group, talked about the arrival of “a catastrophic crisis” even before ObamaCare had been passed and signed.

“Now we’re talking 30 million more people who will want to see a doctor” under the Democrats’ overhaul he said. “The supply of doctors just won’t be there for them.”

As alarming as those numbers are, the reality might be worse. The ranks will be thinned as physicians simply refuse to work under ObamaCare. In August 2009, 45% of doctors told our IBD/TIPP Poll that they would consider leaving their practices or taking early retirement if the Democrats’ version of reform were to become law. And it did.

The doctors cited various reasons behind their decisions to leave. But the most common explanations centered around the increased costs under the Democrats’ plan, the bureaucratic controls it would bring and its lack of protection from runaway malpractice lawsuits.

“This unconstitutional plan gives sovereignty over our bodies to unelected, unaccountable, ignorant bureaucrats,” said one. “Every governmental micromanagement of our lives has failed in its objective, and caused moral and economic bankruptcy.”

While the oncoming shortage will hit everyone, the Center for Workforce Studies says “the impact will be most severe on vulnerable and underserved populations.” And weren’t those the very people the Democrats said they wanted to help by moving the country into a national health care system?

It’s almost ironic, then, that their attempt to add 32 million to the rolls of the insured will exacerbate the coming physician shortage and is likely to create the sort of disastrous waiting lists that have led to unnecessary pain, suffering and death in Canada and Great Britain.

Don’t think that it can’t happen here. It already has.

In Boston, where the state government runs health care and in doing so has boosted the insured rate from 93.6% to 97.4%, the average waiting time to see a family doctor, according to Merritt, Hawkins & Associates, is now 63 days. That’s the lengthiest wait in the 15 cities the group surveyed and almost two months longer than the wait in Miami, where it’s a relatively short seven days.

With Boston being home to no less than 14 teaching hospitals and located in the state with the highest concentration of doctors, shouldn’t the wait times be much shorter?

Yes, but the intrusion of government changes the calculation. Merritt Hawkins said the longer wait is “driven in part” by the state’s health care reform initiative.

As is almost always the case, a proposal for government to step in and improve lives actually makes matters worse. A few Americans might be better off under ObamaCare than they were before. But for almost everyone else, health care quality will decline.


3M to Change Health-Plan Options for Workers


3M Co. confirmed it would eventually stop offering its health-insurance plan to retirees, citing the federal health overhaul as a factor.

The changes won’t start to phase in until 2013. But they show how companies are beginning to respond to the new law, which should make it easier for people in their 50s and early-60s to find affordable policies on their own. While thousands of employers are tapping new funds from the law to keep retiree plans, 3M illustrates that others may not opt to retain such plans over the next few years

The St. Paul, Minn., manufacturing conglomerate notified employees on Friday that it would change retiree benefits both for those who are too young to qualify for Medicare and for those who qualify for the Medicare program. Both groups will get an unspecified health reimbursement instead of having access to a company-sponsored health plan.

The maker of Post-it notes and Scotch tape said it made the announcement now to give retirees a chance to explore different options during this year’s benefit-enrollment period, according to a 3M memo reviewed by The Wall Street Journal. A 3M spokeswoman, Jacqueline Berry, confirmed the contents of the memo.

“As you know, the recently enacted health care reform law has fundamentally changed the health care insurance market,” the memo said. “Health care options in the marketplace have improved, and readily available individual insurance plans in the Medicare marketplace provide benefits more tailored to retirees’ personal needs often at lower costs than what they pay for retiree medical coverage through 3M.

“In addition, health care reform has made it more difficult for employers like 3M to provide a plan that will remain competitive,” the memo said. The White House says retiree-only plans are largely exempt from new health insurance regulations under the law.

The company didn’t specify how many workers would be impacted. It currently has 23,000 U.S. retirees.

Americans become eligible for the Medicare insurance program at age 65. Starting in 2015, 3M retirees too young to qualify for Medicare will receive financial support through what the company called a “health reimbursement arrangement” and won’t be able to enroll in the company’s group insurance plan. The company described that as an account retirees can use to purchase individual insurance through exchanges that the health law will create in 2014. 3M didn’t provide details on the financial contributions.

Currently, these workers get credits they can use to buy the company’s health plan offering medical, dental and prescription drug coverage, or they can elect to enroll in a health savings account. Such accounts typically provide employees with a contribution to help cover their health costs, and incentivize them to keep medical expenses low.

For those old enough to qualify for Medicare, 3M in 2013 will replace its current retiree medical program with a health reimbursement account, funded partly by the sponsor, that can be used to buy an individual Medicare plan. The federal government provides Medicare but enrollees pay a premium and can opt for privately run plans. Currently, these workers have had access to a reimbursement account that could be used to buy into the company’s group health plan.

Democrats that crafted the legislation say they tried to incentivize companies to keep their retiree coverage intact, especially until 2014. The law creates a $5 billion fund for employers and unions to offset the cost of retiree health benefits. More than 2,000 entities, including many large public companies, have already been approved to submit claims for such reimbursement. 3M did not apply.

“We would certainly welcome their application,” said Reid Cherlin, a spokesman for the White House. Ms. Berry, the 3M spokeswoman, said the company was monitoring the program and its requirements.

Sen. Charles Grassley, an Iowa Republican, said that “for all the employees who were promised they’d be able to keep their current benefits after the health-care law passed, I’m worried that the recent changes we’ve heard about…are just the beginning.”


Health overhaul centerpiece endures growing pains

  By RICARDO ALONSO-ZALDIVAR, Associated Press Writer

WASHINGTON – It’s a centerpiece of President Barack Obama’s health care remake, a lifeline available right now to vulnerable people whose medical problems have made them uninsurable.

But the Pre-Existing Condition Insurance Plan started this summer isn’t living up to expectations. Enrollment lags in many parts of the country. People who could benefit may not be able to afford the premiums. Some state officials who run their own “high-risk pools” have pointed out potential problems.

“The federal risk pool has definitely provided critical access, in some cases lifesaving access, to health insurance,” said Amie Goldman, chair of a national association of state high-risk insurance pools. “That said, enrollment so far is lower than we would have expected.” Goldman runs the Wisconsin state pool, as well as the federal plan in her state.

California, which has money for about 20,000 people, has received fewer than 450 applications, according to a state official. The program in Texas had enrolled about 200 by early September, an official in that state said. In Wisconsin, Goldman said they’ve received fewer than 300 applications so far, with room for about 8,000 people in the program.

That’s not how it was supposed to work.

Government economists projected as recently as April that 375,000 people would gain coverage this year, and they questioned whether $5 billion allocated to the program would be enough.

Federal officials won’t provide enrollment figures, saying several large states have yet to get going.

“We don’t think this is getting off to a slow start,” said Jay Angoff, director of a new insurance oversight office at the Department of Health and Human Services. “We think this is getting off to a good and orderly start.”

Angoff said he’s confident more people will sign up, and he pointed out the program was set up in near-record time.

What happens with the Pre-Existing Condition Insurance Plan is important because it could foreshadow problems with major changes under the law that are still a few years away.

For those who get into the program, it can be a life changer.

Preschool teacher Gail O’Brien, 52, was uninsured and facing cancer treatments that would have left her family deeply in debt. She now pays $495 monthly for a plan with a $5,000 annual deductible. She has a type of immune system cancer, and just one chemotherapy treatment runs to $16,000.

“When I was diagnosed, they told me I had a 60 percent chance of being cured,” said O’Brien, of Keene, N.H. “That’s pretty good odds, but I was also terribly worried about finances. Now I don’t feel like we can’t afford the treatment. It’s manageable to us … and I know I’m going to beat this.”

Obama announced the plan last fall in his health care speech to Congress.

“For those Americans who can’t get insurance today because they have pre-existing medical conditions, we will immediately offer low-cost coverage that will protect you against financial ruin if you become seriously ill,” he pledged.

The result was a program that offers health insurance to people with medical problems at prices the average healthy person would pay, although that’s not necessarily cheap. To qualify, you must have had a problem getting insurance because of a medical condition, and have been uninsured for at least six months. Only U.S. citizens and legal residents can get help.

The program will last until 2014, when the new health law requires insurers to accept all applicants regardless of medical history. Most states have opted to take federal money and design their own programs. But in 23 states and the District of Columbia, the federal government runs the plan directly.

In interviews, state officials and independent experts raised several potential problems.

_Premiums may be out of reach. In many states, people in their 40s and 50s face monthly premiums ranging from $400 to $600 and higher. “I think there’s some sticker shock going on,” said Sabrina Corlette, a Georgetown University research professor. “People who may be eligible are finding out that even if they can get the insurance, the price is too high.” Pennsylvania, which set a premium of $283 for all ages, has had no problem getting applicants.

_A barrier may include requirements that people be uninsured for at least six months and that people provide documentation that they’ve been turned down by an insurer. “There are many people who don’t meet the criteria for the federal pool, particularly the six months without coverage,” said Goldman.

_In states where the federal government runs the program directly, the insurance plan doesn’t provide coverage for prescription drugs until people have met a $2,500 annual deductible. “Applying this high … deductible to the pharmacy benefit is a real barrier to consumer access to medications,” Steven Browning, a Texas official, wrote HHS last week.


Crass Market – How ObamaCare’s exchanges undermine quality health care

When Barack Obama pitched his health care overhaul last year, he declared, “My guiding principle is…that consumers do better when there is choice and competition.” But judging by the legislation he signed into law, his idea of a competitive marketplace is one that’s run by the government.

ObamaCare calls for each and every state to set up a “health exchange,” a highly regulated, government-run marketplace where individuals can shop for health insurance, by 2014. Each state is required to either show progress on building an exchange by 2013 or make way for the federal government to build and manage one directly.

These exchanges are the chief method by which the federal government will exert control over the insurance marketplace. Despite being operated at the state level (provided they choose to set up the exchange), state governments won’t entirely be in charge. The Department of Health and Human Services will have the authority to determine minimum health insurance requirements for most medical services and providers as well as cost-sharing details for plans offered through the exchanges. By the end of the decade, the Congressional Budget Office estimates that 24 million individuals will be served by these exchanges.

In theory, they will expose health insurance customers to greater competition while protecting them through regulation. Insurers participating in the exchanges, for example, will face strict limits on how they can price their premiums according to individual risk factors. In practice, they will likely prove difficult to design and implement, and may ultimately undermine the country’s quality of care. No matter what, there is little doubt that the exchanges will fundamentally alter the health insurance landscape across the states.

Already, some state insurance regulators—including the head of the National Association of Insurance Commissioners’ exchange task force—are openly advocating banning insurance companies from selling individual policies outside the exchanges, leaving the state-run exchanges as the sole market for individual health insurance.

Others simply propose applying exchange regulations to all health insurers, even if they operate outside the exchanges. The effect of both policies would be the same: to get rid of individual insurance sales outside the purview of the exchanges and their rules.

States tasked with building the exchanges can expect the process to be tricky at best. Because the exchanges will be the vehicle through which individuals receive ObamaCare’s new health insurance subsidies, they will be expected to quickly and accurately determine an individual’s eligibility. That will require the exchanges to rapidly verify such variables as family size, location, smoking status, and income.

Income verification will be the biggest challenge of all, as eligibility is based on family income—a major problem for dual income homes. Will states ask employed women to provide their husband’s tax returns? What if she’s separated but not divorced?

Meanwhile, there’s evidence that the sort of government-managed competition fostered by exchanges does little to prevent adverse selection. Indeed, because insurers will be limited in terms of how they can charge based on health risk factors, the new rules may encourage plan providers to avoid investing in resources that help the sick. 

For example, a 1997 New England Journal of Medicine study looked at billing records for elderly Americans participating in Medicare HMOs in Florida. The study found that, despite exchange-like regulations guaranteeing access to any HMO plan and prohibiting insurer cherry picking (or “medlining,” as it’s sometimes called), insurance companies managed to lure in the healthiest—and cheapest—patients, while leaving the sickest, most expensive patients on publicly funded Medicare.

Individuals enrolled in the HMOs used two-thirds less care than those on traditional Medicare. And those who eventually rejoined the publicly funded Medicare rolls went on to use 180 percent once back on the public program. In other words, despite rules that were designed to ensure equality, private insurers had still managed to attract the healthiest, cheapest patients while pushing the sickest, most expensive patients away.

But how do they do this? As John Goodman, president of the National Center for Policy Analysis, explained in his book Lives at Risk, plan providers in managed care environments offer benefits likely to attract healthy people, like sports club memberships, but avoid or dump services that will attract sick and expensive individuals.

In 1998, for example, the Kaiser Family Foundation released a study suggesting that Medicare HMOs tailored their advertising to “target physically and socially active seniors, rather than beneficiaries in poor health.” That same year The Washington Post reported on one health plan in Minnesota that offered easy access to obstetricians, but quickly dropped the service after it lost millions by attracting too many pregnant women. Another health plan in California quit dealing with a university hospital that had developed a reputation for pursuing complex, expensive treatments.

Or look at the case of Shelby Rogers, as noted by the Cato Institute’s director of health policy studies, Michael Cannon. In 2008, The Washington Post reported on the story of the 13-year-old with muscular atrophy whose private duty nurse was initially paid for by her family’s federally-provided insurance. Eventually, though, the insurer tried to back out. Why? According to a representative, the reason was because coverage for private duty nurses made the plan too likely to attract patients with similar maladies as Shelby’s.

ObamaCare’s defenders will likely argue that such practices merely prove the need to get tough with insurers. The ominous warnings against insurers from Health and Human Services Secretary Sebelius surely count. But in ObamaCare’s exchanges, which force insurers to take all comers and charge similar prices regardless of health history, pressure to avoid the sick by any means will be fierce. Squeezed by federally-required regulations, insurers will certainly compete—but only to avoid the sick.

Peter Suderman is an associate editor at Reason magazine and a 2010 Robert Novak Journalism Fellow.


California Assumes Lead Role in National Reform

by David Gorn, California Healthline Sacramento Bureau

When a number of national health care reform provisions took effect last week, identical provisions had already been passed by the California Legislature and were sitting on the governor’s desk, waiting for a signature.

Yesterday, the governor signed those bills and a slew of other health care reform measures that moved California into the forefront of the national health care reform movement.

While other states have been convening task forces and taking a wait-and-see approach to health care reform, California has acted. Among its first-in-the-nation accomplishments:

  • Expanding on the idea of its smaller state program, California set up a much larger federal high-risk health insurance pool program in record time. The Pre-Existing Condition Insurance Plan has been taking applications for a month now and is expected to enroll patients starting Oct. 7;
  • Following the lead of federal health care reform, the state passed laws to extend dependent coverage to age 26; eliminate pre-existing conditions as a reason to refuse coverage in children under 19; eliminate rescission of health coverage once a patient is covered; and expand preventive care coverage; and 
  • Taking its biggest step forward through the health care reform door, the governor yesterday approved the creation of the California Health Benefit Exchange, a consortium of individuals and small businesses that will pool their buying power through a state agency in order to get better health care coverage at lower prices.

“There are many reasons why California has been so proactive,” Janet Coffman, professor at the UCSF Institute for Health Policy Studies, said.

“For one thing, it’s helpful to draw down the federal dollars,” she said. “And it’s an opportunity to be a model for the nation, in thinking through and proposing solutions to meet the health care needs of its people.”

Been Here Before

California HHS Secretary Kim Belshé said California is ahead of the health care reform curve in part because of its significant efforts to set up health care reform in the recent past.

“California has been at the forefront of efforts to improve health outcomes since the governor and [then Assembly Speaker Fabian] Nuñez proposed health care reform back in 2007,” she said.

The California effort to set up major reform failed to become law, but Belshé said its impact is still being felt.

“While it was unsuccessful,” she said, “it still helped contribute to the model that eventually became federal law.”

That 2007 effort made a big difference in California lawmakers’ willingness to move on working to incorporate national health care reform, once it became law. Since politicians were familiar with the language and concepts of reform, and since the funding was federal, it was easier for California to move quickly.

Because the state already had a high-risk health insurance pool, it had the institutional knowledge of how to run one. In addition, “California has the benefit of having run an exchange program before, so we have the history, the experience and expertise to help develop the legislation,” Belshé said. Belshé was referring to the Health Insurance Plan of California (later called PacAdvantage), which formed in 1992 and operated until 2006.

Other States Are Watching

According to researcher Coffman, it’s difficult to track all efforts in all states. She said about 15 states so far have passed laws of varying authority on the issue of mandating maternity care benefits. Maryland passed a law limiting pre-existing conditions as a basis for denial of health care coverage for children. Connecticut and Massachusetts had established exchanges before the national health care reform law passed.

“But beyond that,” Coffman said, “the most states have done, really, is to set up a task force commission to study things.”

John Arensmeyer, founder and CEO of Small Business Majority, a California-based advocacy organization, said many eyes are trained in this direction.

“I do think the rest of the country is looking to California — looking at what California does in terms of ideas and strategies, and how to structure things,” Arensmeyer said.

“Every state will need, at some point, to do what California is doing,” John Ramey, executive director for Local Health Plans of California, said. “Each state is going to create its own exchange, with some degree of variance between the states. It’s a question of how it’ll be set up, state to state.”

Belshé  said she has traveled across the nation, and the interest in following California’s lead is undeniable. “I’ve been informed by meetings around the country,” she said. “All these things are issues they’re looking at closely. But clearly California is not only going first with the exchange, but in a number of health care reform-related laws,” she said.

“All of the states are thinking and talking about it,” Belshé  said. “But California has moved ahead of thinking and talking.”

Why Go First?

If other states are going to learn from California’s example, and possibly develop better systems and law language, and since national reform isn’t due to kick in until 2014, why would California step on the national stage first?

There are benefits to being first, Coffman said.

“In some cases, passing laws now will enable California to move faster and set up reforms before 2014,” she said. “For instance, with maternity care coverage — the federal government hasn’t yet specified what it wants, exactly, but it’s reasonable to assume maternity will be there. Well, if that change goes into effect in January in California, and we change every policy starting in January, from the point of view of those consumers who stand to benefit from it, that’s a really good thing.”

Some of the federal laws begin this year, such as extending dependent health care coverage to age 26. California’s passage of the same law, basically, is an effort to cut down on ambiguity or contradiction between state and federal law and to eliminate unnecessary lawsuits. The sooner that happens, Coffman said, the better it is for California.

And one other thing: Even though the national health reform law must be implemented by 2014, a lot of federal dollars are available now. To cash-strapped California, that is a tune to which it can dance.

“There are benefits to consumers who could take advantage of these things — for instance, more childless adults will be enrolled more quickly,” Coffman said. “That’s an advantage for people in California, but also for the state in terms of drawing down federal dollars.”

There has also been speculation in Sacramento that, since the national health care reform law is still under fire, the final version in 2014 might be slightly watered down — so it makes sense for the state to act now and be the first state to secure reform funding.

“Given our budget crisis, the state needs every federal dollar it can get,” Coffman said.

“You already see some effort to chip away bits and pieces [of federal reform], like the prevention and public health fund recently. There was activity in the Senate earlier this month to repeal that fund. That was defeated, but it was a skirmish,” Coffman said. “There’s something to be said for getting the good stuff now.”

To Belshé, the work on health care reform in California has provided a strong counterpoint to the contentious and partisan national debate.

“We’ve proven that we can move implementation of health care reform forward,” Belshé said. “But we’ve also shown that you really can bring disparate groups together and agree on things.”

And that’s the lesson Belshé hopes other states monitor most closely — how to include all stakeholders and avoid the partisan infighting that has marked national health care reform.

“I know there’s a tremendous amount of interest in how California has approached and structured the reform principles,” she said. “There are issues around the authority given to an exchange, for instance, and other states are already looking at this to inform their own thinking.

“Every state’s approach to enforcement really varies,” she said. “California has placed priority on setting high standards, and those standards represent a strong foundation you don’t see in other states.”

But as those states move forward with reform implementation, she said, you might see those standards put in place more often, and California’s effort now might eventually help produce a higher level of cooperation, based on mutual interest, around the rest of the country.



Chicago Tribune –

Sept. 26: Workers can expect to pay hundreds of dollars more for their health care coverage next year. In 2011, the combined average of premium and out-of-pocket costs for health care coverage for an employee is projected to climb to $4,386, according to an annual study by Hewitt Associates to be released this week. That’s a 12.4 percent increase, or $486, over this year.

Companies, meanwhile, will see their health insurance costs go up nearly 9 percent, to an annual tab of $9,821 per employee, or double the employer’s annual worker tab from nine years ago, according to Lincolnshire-based Hewitt.

“The practical reality is we are now getting to the point where the average employee is costing the average employer $10,000 a year for health care,” said John Vlajkovic, principal in Hewitt’s health management practice.

Overall health care costs continue to rise 6 percent to 8 percent annually, primarily because advances in medical technology and the increasing use of medical services by an aging population.

And in the wake of the recession, employment trends also are affecting health care costs: Companies are hiring fewer younger people, so premiums paid by this segment of the working population who typically use fewer health services are not absorbing the costs of older employees who do.

“An older population tends to have chronic conditions like diabetes,” Vlajkovic said. “And when your hiring rates have slowed, you are not bringing in a younger work force.”

Premiums are being affected by the implementation of the new federal health care law, but the impact is expected to be minimal. “Health care reform has added to the cost burden, but that is only an additional percent or two,” Vlajkovic said.

Industry analysts have said the health law could temper cost increases for everybody once the more than 30 million uninsured have coverage because it will spread risk over a larger population. But that will take time. Although several major new consumer benefits started last week, this broadened coverage will not go into effect until 2014.

“Reform creates opportunities for meaningful change in how health care is delivered in the U.S., but most of these positive effects won’t be felt for a few years,” said Ken Sperling, Hewitt’s health care practice leader. “In the meantime, employers continue to struggle to balance the significant health care needs of an aging work force with the economic realities of a difficult business environment.”

Next year, workers are expected to contribute about $184 a month, 12 percent more than they do now. Their out-of-pocket costs will jump, too, rising 12.5 percent, to $181 a month in expenses, which include covering deductibles as well as co-payments and co-insurance for prescriptions and visits to the doctor.

Workers will get a first glimpse of health care costs during the coming weeks of open-enrollment season, the annual corporate ritual that allows employees to select or change their benefit plans for the following year.

Hewitt’s projections are calculated using data from 350 major employers and more than 14 million health plan participants spending more than $50 billion annually on health care, and they are averaged out per worker. Employees with family coverage tend to pay more, and workers with single coverage tend to pay less.

And because Hewitt’s survey focuses on employers with an average of 16,000 employees, businesses with fewer workers tend to have higher costs than those highlighted in the survey.

Some companies are warning workers to expect cost changes in their health care coverage. Boeing Co., the Chicago-based aerospace giant, will ask certain nonunion employees to shoulder more of the burden of health costs in 2011.

“Health care coverage for employees represented by unions is governed by collective bargaining agreements and will be discussed as those contracts are renegotiated,” Jim Albaugh, president of Boeing’s commercial airplane division, said in a Sept. 13 e-mail to employees. Boeing declined to disclose the increases ahead of informing its workers in October.

This year, Boeing is paying 89 percent of total health care costs for employees, which is well above the national average. Most employers pay about 78 percent of the total premium, according to Hewitt’s survey.

“The soaring cost of health care, which for decades has exceeded the rate of inflation, has had a profound impact on our company and our ability to offer superior products at competitive prices,” Albaugh said in the e-mail.
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